AUD/USD consolidates just below 0.7370 Tuesday highs as bulls eye push towards 0.7400

  • AUD/USD is currently trading just below Tuesday highs at 0.7369, as bulls eye a push towards the 0.7400 level.
  • A significant improvement in global risk appetite gave AUD a boost on Tuesday and sets the currency up well for the coming Wednesday Asia session.
  • To the downside, significant levels of support to note are just below 0.7350 and around 0.7340.

AUD/USD trades slightly below highs set on Tuesday of just below 0.7370, having recovered from a sizeable setback midway through the day that saw the pair drop as low as 0.7310. AUD/USD closed Tuesday out with gains of just shy of 80 pips or slightly over 1.0%.

AUD boosted amid risk-on flows

Fundamental developments thus far on the week seem to have ticked all the right boxes to send risk assets higher; AstraZeneca will be distributing vaccines for use in a few weeks, US data has broadly come in better than expected while European data has not been as bad as feared, US President Trump has allowed the formal transition process in the transition of power to the Biden Administration (first steps to him officially conceding the election) and US President-elect Joe Biden has selected former Chairman of the Fed Janet as his Treasury Secretary (a “safe pair of hands”).

US equities closed the US session with solid gains, with the S&P 500 back close to all-time highs and the Dow Jones going above 30K for the first time. Meanwhile, European equities also closed with solid gains and the MSCI World Index hit all-time highs and crude oil markets hit their highest levels since March.

Thus, risk-sensitive currencies outperformed on Tuesday at the expense of the likes of USD, CHF and JPY. Out of the G10, AUD is unsurprisingly the second-best performer after NOK (the Aussie has the highest beta to USD besides NOK out of the G10 currencies).

Fundamental news out of Australia has been sparse so far on the week, with the currency largely thus far trading on global themes/US dollar dynamics. Comments from RBA Deputy Governor Debelle during Tuesday’s Asia session added nothing new, while Australian trade numbers went under the radar.

Looking ahead, Wednesday’s Asia session will see the release of Australian Construction Work Done for Q3, but this data is unlikely to distract AUD from global dynamics.

AUD/USD bulls eyeing a push towards 0.7400

With AUD/USD just below its Tuesday highs at 0.7369, a test soon is likely. If the pair can manage to break above this level, the door will have been opened for an advance towards the 0.7400 level, given the lack of further significant levels of resistance in the interim.

Beyond this psychological level resides year-to-date highs at just below 0.7420. With NZD/USD already pressing to fresh multi-year highs this week, some catch up in AUD/USD is entirely possible.

Conversely, in the downside scenario, AUD/USD has some fairly decent levels of support to take note of; just below 0.7350 is the 16 September high, followed by the 9 and 17 November highs at 0.7340.

A break below these levels takes AUD/USD back into the 0.7220-0.7340ish range that is had conformed to for most of the last two weeks.

AUD/USD four hour chart


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